Digital Lending Trends In The U.S. Over The Years
According to research, government engagement, smartphone demand, high visibility, and multiple options for lenders and borrowers are some of the factors driving the growth of digital lending.
Author:Frazer PughReviewer:Gordon DickersonSep 28, 20229 Shares291 Views
According to research, government engagement, smartphone demand, high visibility, and multiple options for lenders and borrowers are some of the factors driving the growth of digital lending. While the rise of advanced technologies has led to an increase in online lending among the young population, most seniors still prefer traditional lending methods.
In this discussion, we examine digital lending trends in the U.S. and the factors driving growth. Read more.
Background: Early Years
The Grand National Bank of St. Louis, Missouri, pioneered innovation in banking in the 1930s with the introduction of drive-up teller service. Banking was once considered a luxury, so this was a risky move. Drive-up tellers were more akin to ATMs, operated by tellers behind bulletproof enclosures. Customers could more easily access financial services from these cars.
Even though the services were only offered to a few customers, this concept served as a foundation for future lenders to develop solutions that would improve banking transactions for customers.
The Credit Card Era
The first credit card was introduced by Diners' Club in 1950 and made it easier for customers to access credit to buy household goods on credit and pay for them later.
The credit card was a groundbreaking invention that was accepted internationally as a purchasing card. Bank of America was perhaps the first financial institution to issue credit cards to more than 60,000 California residents. Unfortunately, this leads to credit defaults and widespread fraud.
Despite these shortcomings, other cards such as Visa, Discovery Card and American Express were invented and have proven to be a great success for Americans. Currently, there are more companies issuing credit cards, which has greatly impacted the credit industry.
The Advent of Automated Teller Machines
Automated Teller Machines (ATMs) are innovative tools first introduced by Chemical Bank in 1969. These machines allow customers to easily access money without having to stand in line at the banking hall. In addition to quick access to cash, customers can also take out loans within their credit card limits.
Like the bank, an ATM processes the cash advance and disburses the money. Some lenders offer customers the option of applying for online loans through an ATM, which are then applied to their credit card balances.
Next: Mobile Apps and Banking
The advancements in technology has facilitated quick lending to customers via mobile apps. Smartphones have evolved at a greater speed and have made it easier for customers to access banking services anywhere on the go.
With a mobile gadget you can access your bank balance, transfer money, invest,manage your financial to-dos and apply with Creditninja online. There's no end to the useful features as more are being developed everyday.
Growth of Fintechs: Availability of Business Loans and Growth of SMEs
The fintech market is well advanced and has a total value of $1,765 billionin 2022. As technology advances, there is a rapid growth of fintechs offering loans to individuals and businesses. The benefit of easy access to credit means businesses can have capital to fund operations, expand, and purchase equipment.
Digital lending has enabled small businesses whose applications have been rejected by traditional banks to obtain credit even with poor scores. Added to this is the use of artificial intelligence (AI), which enables the automation of complex services such as underwriting, lending, asset management and collections.
In addition, most lenders have original tools that can evaluate a borrower's profile in terms of credit scores, payment history, and debt-to-income ratio to assess their creditworthiness. They can also predict the amount of arrears and subsequently their systems alert customers when loan repayments are due.
Wrapping Up: Moving Forward
Digital lending is key to a brighter future, as many Americans have easy access to loans with lower processing fees and favourable interest rates. As technology continues to evolve, consumers can only expect better products, more business, and improved lifestyles.
Frazer Pugh
Author
Gordon Dickerson
Reviewer
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